When is Debt CONsolidation a Bad Idea?


Almost always.  In our case, never ever is a Con loan a good idea.

I have a 2nd mortgage dressed as an installment loan.  I bought into the whole idea of consolidating most of our unsecured debt into this loan.  What I did not do was to cut up or close those accounts or steer clear of just creating new accounts later.  Not the banks fault I know.

What is the concern is that just since this January of 2008 I have paid $700 of interest on this loan.  That is just five months!  The balance has not dropped even $100 this year.  We are now realizing we would have been better off to keep the other cards and just pay them off quickly and then roll the payment into the next instead of risking our house on unsecured debt.

So tell me if I pay $15,000 worth of interest on a $20,000 loan, is that a good plan?  Yes, yes I know the loan is for $20,000 and the rate is 8.875%.  That rate for that amount for an “installment” loan is actually pretty good, but we have had this loan for 26 payments of the 188 and we still owe $19,635.  Is this a good thing?

The question for you the intrepid reader is to leave a comment on the best way out of this.  Do we add it to the debt snowball?  It is “secured” debt, but it is hard to ignore.  Do we just pay off the other unsecured debt over the next 4.5 years and then target this monster?

Show some love with some help – Jeremy

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